Question 1

All else being equal,a reduction in selling price will ________.

Accepted Answer

A)  increase contribution margin 
B)  reduce fixed costs 
C)  increase variable costs 
D)  reduce operating income 
A)  increase contribution margin 
B)  reduce fixed costs 
C)  increase variable costs 
D)  reduce operating income D

Question 2

Freddie's Company has mostly fixed costs and Valerie's Company has mostly variable costs.Which company has the greatest risk of a net loss? Explain why.

Accepted Answer

Freddie's Company has the greatest risk of net loss because more units are required to reach breakeven point than for Valerie.Freddie's Company is operating at a higher operating leverage than Valerie's Company and hence faces a larger risk of loss during economic downturn.

Question 3

In a company with low operating leverage,________.

Accepted Answer

A)  fixed costs are more than the contribution margin 
B)  contribution margin and operating income are inversely related 
C)  there is a higher possibility of net loss than a higher-leveraged firm 
D)  less risk is assumed than in a highly leveraged firm 
A)  fixed costs are more than the contribution margin 
B)  contribution margin and operating income are inversely related 
C)  there is a higher possibility of net loss than a higher-leveraged firm 
D)  less risk is assumed than in a highly leveraged firm D

Question 4

Zeta Corp's most recent income statement is given below.
 $\begin{array}{lr}\text { Sales }(8,000 \text { units }) & \$ 160,000 \
\text { Less variable expenses } & (68,000)\
\text { Contribution margin } & 92,000 \
\text { Less fixed expenses } & (50,000) \
\text { Net income }&\$42,000
\end{array}$ Required:
 $\begin{array} { l l }
 \text {a.Contribution margin per unit is }&\$\_\_\_\_ \text { per unit }\
 \text {b. If sales are doubled to $ \$ 240,000 $, total variable costs will equal }&\$\_\_\_\_ \
 \text {c.If sales are doubled to $ \$ 240,000 $, total fixed costs will equal }&\$\_\_\_\_ \
 \text {d. If 20 more units are sold, profits will increase by}&\$\_\_\_\_ \
 \text { e. Compute how many units must be sold to break even.}&\#\_\_\_\_ \
 \text {f.Compute how many units must be sold to achieve profits of $ \$ 60,000 $. }&\#\_\_\_\_ \
\end{array}$

Accepted Answer

a.Contribution margin per unit is $92,00

Question 5

Answer the following questions using the information below:

Southwestern College is planning to hold a fund raising banquet at one of the local country clubs. It has two options for the banquet:
 
Southwestern College has budgeted $1,800 for administrative and marketing expenses. It plans to hire a band which will cost another $800. Tickets are expected to be $30 per person. Local business supporters will donate any other items required for the event.

-Which option provides the greatest operating income if 600 people attend?

Accepted Answer

A)  Option one 
B)  Option two 
C)  Operating incomes are identical. 
D)  Both the options have 0 operating income as they are operating at breakeven point. 
A)  Option one 
B)  Option two 
C)  Operating incomes are identical. 
D)  Both the options have 0 operating income as they are operating at breakeven point.

Question 6

Answer the following questions using the information below:
Alex Furniture sells a table for $850. His fixed costs are $25,000, while his variable costs are $500 per table. He currently plans to sell 175 tables this month.
-Winnz sells 8,000 units resulting in $100,000 of sales revenue,$35,000 of variable costs,and $45,000 of fixed costs.The contribution margin percentage is ________.

Accepted Answer

A)  66.67% 
B)  65.0% 
C)  37.5% 
D)  75.0% 
A)  66.67% 
B)  65.0% 
C)  37.5% 
D)  75.0%

Question 7

At the breakeven point of 2,000 units,variable costs total $4,000 and fixed costs total $6,000.The 2,001st unit sold will contribute ________ to profits.

Accepted Answer

A)  $1 
B)  $2 
C)  $3 
D)  $5 
A)  $1 
B)  $2 
C)  $3 
D)  $5

Question 8

Contribution margin = Contribution margin percentage × Revenues (in dollars).

Accepted Answer

A) True 
 B)False

Question 9

The Holiday Card Company,a producer of specialty cards,has asked you to complete several calculations based upon the following information:
 $\begin{array}{lr}
\text { Income taxrate } & 30 \% \
\text { Selling price per unit } & \$ 6.60 \
\text { Variable cost per unit } & \$ 5.28 \
\text { Total fixed costs } & \$ 46,200.00
\end{array}$ Required:
a.What is the breakeven point in cards?
b.What sales volume is needed to earn an after-tax net income of $13,028.40?
c.How many cards must be sold to earn an after-tax net income of $18,480?

Accepted Answer

a.Breakeven point in units = $46,200/($6

Question 10

Answer the following questions using the information below:
Shine Jewelry sells 400 units resulting in $7,000 of sales revenue, $3,000 of variable costs, and $1,500 of fixed costs.
-Contribution margin per unit is ________.

Accepted Answer

A)  $4.00 
B)  $11.00 
C)  $10.00 
D)  $8.00 
A)  $4.00 
B)  $11.00 
C)  $10.00 
D)  $8.00

Question 11

Which of the following will increase a company's breakeven point?

Accepted Answer

A)  increasing variable cost per unit 
B)  increasing contribution margin per unit 
C)  reducing its total fixed costs 
D)  increasing the selling price per unit 
A)  increasing variable cost per unit 
B)  increasing contribution margin per unit 
C)  reducing its total fixed costs 
D)  increasing the selling price per unit

Question 12

The degree of operating leverage at a specific level of sales helps the managers calculate the effect that potential changes in sales will have on operating income.

Accepted Answer

A) True 
 B)False

Question 13

In the graph method of CVP analysis,the horizontal line above the x-axis represents the total cost line.

Accepted Answer

A) True 
 B)False

Question 14

Contribution margin equals ________.

Accepted Answer

A)  revenues minus period costs 
B)  revenues minus product costs 
C)  revenues minus variable costs 
D)  revenues minus fixed costs 
A)  revenues minus period costs 
B)  revenues minus product costs 
C)  revenues minus variable costs 
D)  revenues minus fixed costs

Question 15

Beta Corp reported the following:
 $\begin{array}{lr}
\text { Revenues } & \$ 2,500 \
\text { Variable manufacturing costs } & \$ 300 \
\text { Variable nonmanufacturing costs } & \$ 480 \
\text { Fixed manufacturing costs } & \$ 350 \
\text { Fixed nonmanufacturing costs } & \$ 270
\end{array}$ Required:
a.Compute contribution margin.
b.Compute gross margin.
c.Compute operating income.

Accepted Answer

a.Contribution margin $2,500 −

Question 16

The selling price per unit less the variable cost per unit is the ________.

Accepted Answer

A)  fixed cost per unit 
B)  gross margin 
C)  margin of safety 
D)  contribution margin per unit 
A)  fixed cost per unit 
B)  gross margin 
C)  margin of safety 
D)  contribution margin per unit

Question 17

Answer the following questions using the information below:
Star Jewelry sells 500 units resulting in $75,000 of sales revenue, $28,000 of variable costs, and $18,000 of fixed costs.
-Breakeven point in units is ________.

Accepted Answer

A)  196 units 
B)  203 units 
C)  185 units 
D)  192 units 
A)  196 units 
B)  203 units 
C)  185 units 
D)  192 units

Question 18

In the profit-volume graph the point at which the profit-volume line and x-axis intersect is the breakeven point.

Accepted Answer

A) True 
 B)False

Question 19

Fixed costs ________.

Accepted Answer

A)  are considered variable costs over the long run 
B)  provide less operating leverage 
C)  reduce the risk of loss 
D)  are graphed as a steeply sloped line 
A)  are considered variable costs over the long run 
B)  provide less operating leverage 
C)  reduce the risk of loss 
D)  are graphed as a steeply sloped line

Question 20

An expected value is the weighted average of the outcomes,with the probability of each outcome serving
as the weight.

Accepted Answer

A) True 
 B)False

All else being equal,a reduction in selling price will ________.

Freddie's Company has mostly fixed costs and Valerie's Company has mostly variable costs.Which company has the greatest risk of a net loss? Explain why.

In a company with low operating leverage,________.

At the breakeven point of 2,000 units,variable costs total $4,000 and fixed costs total $6,000.The 2,001st unit sold will contribute ________ to profits.

Contribution margin = Contribution margin percentage × Revenues (in dollars).

Answer the following questions using the information below: Shine Jewelry sells 400 units resulting in $7,000 of sales revenue, $3,000 of variable costs, and $1,500 of fixed costs. -Contribution margin per unit is ________.

Which of the following will increase a company's breakeven point?

The degree of operating leverage at a specific level of sales helps the managers calculate the effect that potential changes in sales will have on operating income.

In the graph method of CVP analysis,the horizontal line above the x-axis represents the total cost line.

Contribution margin equals ________.

Beta Corp reported the following: Revenues \ 2,500 Variable manufacturing costs \ 300 Variable nonmanufacturing costs \ 480 Fixed manufacturing costs \ 350 Fixed nonmanufacturing costs \ 270 Required: a.Compute contribution margin. b.Compute gross margin. c.Compute operating income.

The selling price per unit less the variable cost per unit is the ________.

Answer the following questions using the information below: Star Jewelry sells 500 units resulting in $75,000 of sales revenue, $28,000 of variable costs, and $18,000 of fixed costs. -Breakeven point in units is ________.

In the profit-volume graph the point at which the profit-volume line and x-axis intersect is the breakeven point.

Fixed costs ________.

An expected value is the weighted average of the outcomes,with the probability of each outcome serving as the weight.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters

Exam 3: Cost-Volume-Profit Analysis

All else being equal,a reduction in selling price will ________.

Freddie's Company has mostly fixed costs and Valerie's Company has mostly variable costs.Which company has the greatest risk of a net loss? Explain why.

In a company with low operating leverage,________.

At the breakeven point of 2,000 units,variable costs total $4,000 and fixed costs total $6,000.The 2,001st unit sold will contribute ________ to profits.

Contribution margin = Contribution margin percentage × Revenues (in dollars).

Answer the following questions using the information below: Shine Jewelry sells 400 units resulting in $7,000 of sales revenue, $3,000 of variable costs, and $1,500 of fixed costs. -Contribution margin per unit is ________.

Which of the following will increase a company's breakeven point?

The degree of operating leverage at a specific level of sales helps the managers calculate the effect that potential changes in sales will have on operating income.

In the graph method of CVP analysis,the horizontal line above the x-axis represents the total cost line.

Contribution margin equals ________.

Beta Corp reported the following: Revenues \ 2,500 Variable manufacturing costs \ 300 Variable nonmanufacturing costs \ 480 Fixed manufacturing costs \ 350 Fixed nonmanufacturing costs \ 270 Required: a.Compute contribution margin. b.Compute gross margin. c.Compute operating income.

The selling price per unit less the variable cost per unit is the ________.

Answer the following questions using the information below: Star Jewelry sells 500 units resulting in $75,000 of sales revenue, $28,000 of variable costs, and $18,000 of fixed costs. -Breakeven point in units is ________.

In the profit-volume graph the point at which the profit-volume line and x-axis intersect is the breakeven point.

Fixed costs ________.

An expected value is the weighted average of the outcomes,with the probability of each outcome serving as the weight.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters